Southern Copper: Mining


Southern Copper Corporation is an integrated copper producer with mining, smelting and refining facilities located in Mexico and Peru. The company’s main products are copper, molybdenum, zinc and silver. Southern Copper has exploration activities in Argentina, Chile, Ecuador, Mexico and Peru. Originally known as the Southern Peru Copper Corporation, the firm was incorporated in Delaware, US in 1952 and has conducted mining operations since 1960. In 2005 the company was renamed Southern Copper Corporation. Southern Copper is controlled by Americas Mining Corporation (AMC), a fully owned subsidiary of Grupo México. AMC holds an 81.5% stake in the common shares of Southern Copper, with the remaining 18.5% a public float.

In Peru Southern Copper operates two open-pit mines in Toquepala and Cuajone, located in the south of the country. The firm also operates a smelter and refinery at Ilo, along the coast. Its Mexico operations are conducted through a subsidiary, Minera México, acquired in 2005, which operates the La Caridad complex, consisting of an open-pit mine, a smelter, a refinery and a rod plant. The Buenavista open-pit mine, formerly known as Cananea, five underground mines and a zinc refinery are all grouped under the subsidiary Industrial Minera México. In 2016 Southern Copper reached a new company output record, as production increased by 21% to 900,000 tonnes due to higher output from the Buenavista mine expansion. In 2016 the company registered a net income of $778.8m. As of December 2016 it had total assets of $13.2bn and equity of $5.9bn.

Business Strategy

The combined reserves of the company’s four mines are the largest of any listed company, with an expected 59-year lifespan. Moreover, its average net direct cash cost ranks in the first quartile of the industry’s cost curve.

Southern Copper is known for having both quality mining assets and fiscal discipline, and while cost increases across the industry in the last decade have had a negative impact on the company, the effect has been less severe for Southern Copper than for other copper producers. The firm’s four mines have the potential for significant expansion. The company also owns smelting and refining facilities in both Peru and Mexico that allow the business to obtain the full market price for metals.

Project Portfolio

Southern Copper has a pipeline of growth projects that have the potential to increase annual copper production from 900,000 tonnes to 1.5m tonnes, a 66% improvement, over the medium term, according to company figures.

In 2016 Southern Copper concluded a $3.5bn investment in the expansion programme of its Buenavista mine in Mexico. This programme, which includes a number of projects, will be in full operation in 2017, and is set to increase production from 180,000 to 500,000 tonnes.

The company has five copper projects in Peru involving a combined capital investment of $2.9bn. These projects include the $1.2bn Toquepala Expansion, which is expected to increase annual copper production from 138,000 to 260,000 tonnes by 2019; and the Tía María project, a 120,000-tonneper-year copper project with a total capital budget of $1.4bn, for which the company is currently working to obtain a construction licence.

The remaining projects in the firm’s $2.9bn development pipeline include investments in infrastructure at Toquepala and optimising the hauling process in Cuajone. Southern Copper’s project schedule also includes the Pilares mine (Mexico), the El Pilar mine (Mexico), the El Arco mine (Mexico), the Los Chancas mine (Peru) and Buenavista Zinc, an open-pit mine in Mexico. These mining projects, which are mostly still in the initial stages of development, could eventually amount to roughly 370,000 tonnes of copper production and 60,000 tonnes of zinc per year.